Monthly Archives: July 2008

Reviving the Doha Round

Talks intended to re-start the Doha Round of World Trade Organization liberalization began on Monday.  The Doha Round, which had been designated the “Development Round” by its proponents, was supposed to address a wide array of issues of concern to developing countries, including liberalization of trade in agricultural goods, reducing agricultural subsidies, and access to essential medicines.  The talks originally broke down two years ago, largely because of the unwillingness of US and European officials to cut subsidies to their farmers.  Parties to the talks are expressing guarded optimism about the outcome.

What’s on the table?  The major sticking point continues to be the slow pace at which the United States and some members of the European Union are willing to remove agricultural tariffs and subsidies.  While the World Trade Organization (and its predecessor organization, the General Agreement on Trade and Tariffs, or GATT) has overseen a dramatic decrease of tariffs and non-tariff barriers to trade in industrial sectors, the agricultural sector has remained largely outside of liberalization efforts.  The European Union has offered to cut its agricultural subsidies by 60% (from €10 billion to €4 billion in annual subsidies).  The United States has offered to trim its agricultural subsidies to $7.6 billion per year.  Both sides face strong domestic opposition to the proposed cuts; both proposals have been dismissed as inadequate by the developing countries at the WTO talks.

Developing countries have long been told by the World Bank and International Monetary Fund that open markets and free trade are the most effective and efficient way to develop an economy.  From their perspective, resistance by the US and EU to liberalize their agricultural markets highlight the injustice of the world trade system, which appears to have one set of rules for the rich and another set for the poor.  That’s what makes the position of the developing countries, particularly of countries like Brazil and India, so compelling.  They have effectively turned the argument in favor of liberalization against countries which historically promoted it most.

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When is a “Timetable” Not a “Timetable”?

On Friday, the Bush Administration and the government of Nouri al-Maliki in Iraq signed a Memorandum of Understanding that would set a “time horizon” for “operational goals” of withdrawing US forces from Iraq.  If this sounds a lot like a “timetable for withdrawal,” that’s because it is.  In the second major policy reversal in a week, the Bush administration moved away from pressuring the al-Malaki government from signing a status of forces agreement that would have seen the establishment of a large, permanent US military presence in Iraq.

In an interview with the German daily Der Spiegel, Iraqi Prime Minister Nouri al-Maliki argued on Saturday that “the tenure of coalition troops in Iraq should be limited” because “artificially prolonging the tenure of US troops in Iraq would cause problems.”  With timeframe does al-Maliki favor?  According to him, 16 months should be about right, with the “possibility of slight changes” depending on conditions on the ground.  Others in the Iraqi government say that five years is more realistic.  The agreement itself contains no specific dates.

The US currently has 15 brigades comprised of approximately 145,000 soldiers on the ground in Iraq.  The Iraqi government would like to see a shift in forces from combat operations to support operations, and a gradual drawdown of forces.  Immunity provisions, which prohibit prosecution of US troops by the Iraqi government for anything they might do while stationed there, have also been a source of controversy. 

The Memorandum of Understanding does not have to be forwarded either to the Iraqi Parliament nor the US Congress for ratification.  For its crafters, this is a good thing.  Given the unpopularity of the agreement in both countries, approval would be difficult.

Five Stories You Might Have Missed

This is the beginning of the regular feature “Five Stories You Might Have Missed.”  In it, I will briefly summarize five of the most important stories from the previous week.  Enjoy!

1.  On Sunday, President Bush agreed to begin discussions with the Iraqi government over the development of a timeline for the withdrawal of US forces from Iraq.  The concession by Bush to the al-Malaki government marks a dramatic reversal of the administration policy, which had previously asserted that the development of such a timeline would constitute a victory for the terrorists.  Stay tuned for a more detailed discussion of this story tomorrow.  In the meantime, read more about it on the Financial Times website. 

2. On Friday, opposition leaders in Bulgaria began debate over a bill that would impeach President Geogi Parvanov, who stands accused of having ties to organized crime.  As one of the newest member states in the European Union, Bulgaria is under pressure to reduce corruption and mismanagement in government, or face the prospect of losing more than €600 million (approximately $950 million) in transfers from the EU.

3. The government of Taiwan announced it had ended its effort to purchase 66 F-16 fighter jets from the United States.  The deal, which had been sharply opposed by the government of China, was part of a general trend in expanding military sales to Taiwan over the past seven years.

4. Farming and automotive interests in Europe, combined with the governments of some member states, pressured European Union negotiators not to offer any additional concessions at trade talks scheduled for next week in Geneva.  The talks, designed to rekindle the World Trade Organization’s Doha Round, target reductions in agricultural subsidies and liberalizing trade in industry and services.  The talks have been stalled for more than two years, and the Geneva negotiations are widely seen as the last chance to salvage the round.  

5. In testimony before Congress on Wednesday, Federal Reserve Chairman Ben Bernanke commented that inflation, estimated at an annual rate of 5% in June—the highest level in the United States since 1991—was “too high” and that fighting inflation was a “top priority” for the Fed.  The primary mechanism the Fed would use to cut inflation would be an increase in the funds rate, an action that would almost certainly slow the economy, already teetering on the brink of recession.

Should You Negotiate with an Enemy?

Multilateral negotiations between Britain, China, France, Germany, Russia, the United States and Iran took place yesterday in Geneva.  American involvement in the negotiations over Iran’s nuclear program mark a fundamental shift in US foreign policy.  Diplomatic relations between Iran and the United States were severed shortly after the seizure of the American embassy in Tehran following the Iranian Revolution in 1979.  Although the United States offered military support to Iran at different points during the eight year Iran-Iraq War (1980-1988), the two countries have had generally had poor relations since 1979. 

Speaking before the Israeli Knesset in May, President Bush cautioned against the “false hope of appeasement.”  At the time, the remark was widely interpreted as a swipe against Barack Obama, who had previously signaled his willingness to engage in diplomatic negotiations with Iran.  It also seemed to be an affirmation of Bush’s aggressive stance towards the “axis of evil.”

Now, by sending William Burns, the third highest official in the State Department, to meet with Iran, the administration is signaling a dramatic policy reversal.  Burns has proposed a “freeze-for-freeze” strategy under which Iran would suspend its nuclear program in exchange for an agreement not to expand international sanctions already imposed on Iran.  This agreement would then form the basis of continued negotiations involving the use of civilian nuclear power in Iran and the termination of sanctions already imposed on the country. 

The proposal, which the administration has insisted is good for only two weeks, marks an opportunity to move forward on the Iranian nuclear question.  But can international diplomacy work?  If our efforts in Iraq have taught us anything, it’s that regime change and policy change brought through force are always more difficult, more expensive, and less effective than anticipated.  Reagan negotiated with the Soviet Union; Nixon negotiated with China.  Neither was guilty of “the false hope of appeasement.”  Negotiations can be effective in achieving foreign policy objectives.  But will diplomacy work with Iran?  Perhaps it’s too early to tell.  But attempting to resolve international crises through diplomacy certainly seems like a logical first step.

The Instability of Coalition Politics

The number of governments facing problems of political instability seems to be on the rise.  Yesterday, I mentioned problems facing Indonesia, Zimbabwe, and Turkey as governments in those countries face increasing challenges from opposition groups hoping to secure political power for themselves. 

But other countries are facing similar challenges.  In India, the continuing debate over the status of the country’s nuclear deal with the United States has prompted a minor political crisis, as Prime Minister Manmohan Singh attempts to keep his fragile coalition together.  Singh’s government is comprised of a coalition of center-left parties.  Earlier this month, the Communist Party of India (Marxist), the coalition’s junior member to Singh’s Congress Party of India, withdrew from the coalition over a nuclear deal signed with the United States.  The Communists argued that the deal represented a transfer of India’s sovereignty to the United States opened the way for the further colonization of India’s economy.  A confidence vote by the Lok Sabha, the lower house of the Indian Parliament, is scheduled for Tuesday.  If the government loses the vote, snap elections will be called.

A vote on the nuclear deal, which would see the US sell nuclear fuel and civilian nuclear technology to India, is also scheduled for a vote in the Indian Parliament later this month.  Ironically, the outcome of that vote may be inconsequential for the nuclear deal, as the deal is currently stalled in the US Congress and appears unlike to move forward before the November elections.

The ruling coalition in Belgium is in even worse shape.  On Monday, Prime Minister Yves Leterme resigned.  Leterme took office in March after a nine month political deadlock in which the country officially had no Prime Minister or government.  The crisis sparked by Leterme’s resignation has been called the worst political crisis faced by Belgium in the country’s history.  Strong divisions between Belgium’s Flemish-speaking population in the north and the French-speaking population in the south have intensified in recent years, and it seems difficult to imagine how a new government, which because of Belgium’s electoral system will almost certainly have to develop out of a multi-lingual coalition involving four or more political parties, will be any more stable. 

So why all this political instability?  Certainly the nature of the parliamentary systems in Belgium and India play a role.  It’s widely held that parliamentary systems, particularly when based on proportional representation electoral systems, are inherently less stable than presidential systems based on single-member district electoral systems.  But for every unstable PR-based parliamentary system like Belgium or contemporary India, there is South Africa or historical India, which has the same political system but is far more stable.  Clearly the issues at play must also be important.  The unique status of identity politics in Belgium, given the country’s status as an artificial creation as a buffer zone between major European powers, clearly has an important influence.  Similarly, in India, the debate over the relative influence of the United States in Indian society is a serious one, as many Indian political leaders continue to hold to the tradition of non-alignment and home rule.

Five Stories You Might Have Missed

Beginning Sunday, I’ll be providing a regular feature entitled “Five Stories You Might Have Missed.”  The entry will highlight five important news stories from the previous week which, while important and interesting, may not have received much attention from the media.  But until next Sunday, here’s a short sample of what you can look forward to:

1.  Tensions in France over the status of the country’s Muslim minority and the position of Muslims in French society continue to intensify.  On Friday, the highest court in France rejected citizenship to a Muslim woman from Morocco claiming she was “insufficiently assimilated” into French society (LINK THIS).  She has lived in France since 2000, and her husband and three child children are already French citizens.

2. A report prepared by the Organization of Petroleum Exporting Countries (OPEC) released on Thursday projected global demand for oil will increase by 50% between 2008 and 2030.  The main cause of the increase: lots of new cars, especially in the developing world.  With oil prices hovering around the $135-140 per barrel range, such an increase in demand could drive oil prices much, much higher.

3. On Wednesday, Malaysian opposition leader Anwar Ibrahim was arrested on charges of sodomy.  According to the Ibrahim’s People’s Justice Party, the arrest was retribution for the party’s success in the country’s March elections.  Malaysia’s Prime Minister, Abdullah Badawi, is under pressure to resign in the face of strong opposition and poor election result.  So far, Badawi has declined to step down, but has promised to leave office in 2010.

4. Talks continue between the government of Robert Mugabe and Morgan Tsvangirai’s opposition party in Zimbabwe.  After Tsvangirai was forced out of the run-off election for the country’s presidency as a result of political violence last month, South Africa’s leadership has tried to broker a compromise government which would see political power shared between the two rivals.  The one sticking point: Mugabe does not want to share power.  That’s a tough position from which to negotiate a power sharing agreement.

5. And finally, in other news of political instability, Turkey’s government has charged 86 people with plotting to overthrow the government.  Turkey’s historically secular government was replaced by a conservative religious government after the elections last year.  The military, however, remains largely secular and suspicious of the government.

The King of Beers is dead! Long live De Koning van Bieren?

Ever wonder how global finance affects your everyday life?  It’s sometimes difficult to make the connections.  But for millions of Bud drinkers, the links just became much clearer.  Belgian brewer In-Bev, the world’s largest beer distributor, announced on Monday that it had reached an agreement with Anheuser-Busch’s board of directors to take over the company.  In-Bev will pay about $50 billion for Anheuser-Busch, best known for producing the iconic American beer Budweiser.

The deal, which has been in the works for over a year, has provoked a strong reaction among some American Bud fans.  Budweiser is the best selling beer in the United States, and some loyalists are promising to fight the buyout.  They’ve organized a petition (launched online at www.SaveBudweiser.com).  Some are calling for a boycott of Budweiser and other Anheuser-Busch labels under a “Drink American” campaign.  The purchase even made the Colbert Report.

According to the French, this kind of cultural assimilation under the forces of economic globalization is nothing new.  Indeed, the French have been fighing the spread of American culture for at least the past 50 years.  The need to fight Americanization and its undermining the culture of France has been one of few items that the French left and right have been able to agree on.  And it’s popular.  In 1999, José Bové, a French farmer and activist, was catapulted into the limelight for dismantling and carrying away a McDonalds that was under construction in Millau.  He said he wanted to prevent American culinary imperialism and the destruction of French cuisine.  French filmmakers have objected to the import of Hollywood films, saying that they undermine French cinema.

What does the In-Bev takeover of Budweiser mean for the US and American culture?  Does this singal the increasing vulnerability of the US to the cultural forces of globalization?  Or does it merely represent he reutn home of the process of globalization?  Whatever the answer, “the King of Beers” now seems placed to become “Le Roi des Bières” (or “De Koning van Bieren” in Flemish…Belgium is, after all, officially a bilungal country).